Big promises, slow progress: Indonesia’s geothermal in 2025

By Raymond Hendriawan

“Indonesia is one of the world’s largest geothermal countries” has become an overused tagline. It still opens almost every speech and conference panel in 2025, but without real growth behind it, the phrase has lost much of its meaning. In 2025, geothermal’s share in the national energy mix is stuck at around 1.7%, barely moving year on year, while total renewables grow from about 13.3% in early 2024 to 16.0% in 2025. Hydro and biomass are the ones expanding faster. Geothermal, supposedly Indonesia’s baseload flagship, is being left behind.

 Indonesia energy mix 2024* vs 2025** (source: *MEMR, **Buku Saku ESDM Sep-2025)

Where the numbers stand

Indonesia’s renewable energy buildout has lagged behind its rhetoric for more than a decade. Under the 2014 National Energy Policy (KEN), the country set a target of 23% renewables in the primary energy mix by 2025. It failed to meet every interim milestone and is now quietly lowering expectations to around 17-19% by year-end.

Fast forward to 2025, and the new Electricity Supply Business Plan (RUPTL) 2025-2034 conveniently resets the scoreboard. State-owned utility PT PLN plans to add around 5.2 GW of geothermal capacity over the decade, lifting installed capacity to roughly 7.8 GW by 2035. On paper, this implies annual additions of about 500-600 MW.

In reality, by the end of 2025 Indonesia has added just 112.7 MW:

• Ijen Unit 1 (34 MW)
• Lumut Balai Unit 2 (55 MW)
• Salak Binary (16 MW)
• Salak Units 4-5-6 retrofit (7.7 MW)

Indonesia YoY geothermal buildout (source: MEMR, Petromindo data repository)

For a country boasting massive potential and aiming to more than double its geothermal fleet in a decade, 2025 is a weak opening move, no matter how you slice it.

Missed tenders, again

In 2024, not a single new geothermal power plant reached commercial operation. Projects expected to come online such as Salak’s binary unit and Ijen Unit 1, slipped into 2025. The government attempted to revive momentum by offering 10 Geothermal Working Areas (WKP) and 11 Exploration and Preliminary Survey (PSPE) areas on the new Genesis platform at IIGCE 2025. The platform was meant to improve transparency and speed up tenders, long-standing pain points for the sector.

List of WKPs and WPSPEs offered on 2025 (source: MEMR)

But as of the end of 2025, there is no single award given for any of these auctions, even with several projects being re-tendered throughout 2025. Director General of New Energy and Renewables (EBTKE) Eniya Listiani Dewi openly links the weak economics of geothermal to the current fiscal regime stated in Government Regulation PP No. 7/2017, stressing that the government must revise the WKP auction rules and improve project IRR from below 10 percent to around 10-11% before the next batch can move. “We want to adopt tax incentives similar to those in the oil and gas sector, including removing the resource tax on geothermal. This would be a strategic step to raise geothermal project IRR, which has been stuck at around 8-9%,” she said.

From the industry side, Julfi Hadi, chair of the Indonesian Geothermal Association (API) and CEO of PT Pertamina Geothermal Energy Tbk (PGE), used the opening of IIGCE 2025 to call for a fundamental reset of tariffs, urging “a revision of the geothermal power tariff scheme to improve project economics and ensure investment competitiveness.”

Permitting and coordination

A single geothermal project still has to navigate a long chain of decision-makers: the Ministry of Energy and Mineral Resources (MEMR), Bappenas, the Ministry of Investment/BKPM, the Ministry of Finance, the SOE Ministry overseeing PLN and PT Pertamina, plus provincial and district governments. Independent studies have flagged this fragmentation for years, calling for a formal coordination mechanism between central and local authorities, but implementation has remained slow (Innovating New Incentive Mechanisms for Energy Transition Projects, Southeast Asia Energy Transition Partnership, March 2025).

At IIGCE 2024, speakers noted that only 11% of Indonesia’s estimated 24 GW geothermal potential had been converted into power and warned that permitting timelines must be cut from five to six years to far less if geothermal is to scale. Then-BKPM minister Bahlil Lahadalia pledged reforms, saying, “We will cut both requirements and timelines to encourage investors to accelerate their investments.”

Brown to Green 2025 conference featuring (left to right) Ferdino Fadillah, Togu Pardede, Roni Chandra Harahap, and Pri Utami (source: IESR)

At the Brown to Green 2025, Togu Pardede, Director of Energy Resources, Mineral and Mining at Bappenas, said bluntly that the missing piece is exactly that one joint decision-making team. “If we had one joint team, it should speed up geothermal projects so they can move quickly. Right now that team does not exist, so coordination cannot be fast, which is probably what happens when there are too many people involved,” he said.

On paper, ministers always talk about cutting permitting time for geothermal projects. In practice, it has taken the government the whole of 2025 just to publicly admit there is effectively no real coordination team.

Beyond the low-hanging fruits

The big, hot, shallow high-enthalpy reservoirs that sit close to infrastructure are either in production or already in an expansion phase. What is left in the queue is increasingly low to medium enthalpy, smaller in size, or technically more complex. These plays need more wells per megawatt, smaller units, and often advance new technology to squeeze out a bankable project IRR.

At Brown to Green 2025, Ferdino R. Fadillah, Program Manager at state-owned infrastructure financing firm PT Sarana Multi Infrastruktur (SMI), spelt out why local funding is still cautious. “Subsurface uncertainty still doesn’t match with local bank risk appetite. Local banks such as BNI already chipped in, but only as far as the development phase,” he said. Exploration remains largely nobody’s balance sheet.

In the same forum, Roni Chandra Harahap, Geothermal Exploration and Exploitation Coordinator at the Directorate General of New Energy and Renewables (EBTKE), hinted at a different barrier using Flores as an example. Diesel generation there costs around IDR 1.2 trillion per year, while proven geothermal could cut electricity costs and save an estimated IDR 80-90 billion in subsidies. Yet the project still does not move. “Whether there is foul play or not, surely hearsay exists and needs to be found out. And this is the job of the law enforcer. This is a real challenge that we need to face,” he said, a remark that almost certainly refers to the prolonged local resistance and conflict around the Poco Leok project.

Conclusion: A slow start that threatens the entire 2026 outlook

Indonesia’s geothermal industry ended 2025 without growing anywhere near the pace required by the new RUPTL. Instead of the 500-600 MW per year implied by PLN’s pathway to 7.8 GW by 2035, the country only managed 112.7 MW this year.

Economically, geothermal is still not bankable. IRR remains stuck at 8-9%, far from the 10-12% developers require. Technically, Indonesia is moving into harder, lower-enthalpy fields where exploration risk is high and financing evaporates. Socially, local resistance continues to stall projects even where diesel replacement is a clear economic win.

What does this mean for 2026? There are several commercial operation date (COD) targets, such as Wayang Windu Unit 3, Salak Unit expansions beyond the 2025 binary and retrofit, and potential small modular ORCs being speed-up. Progress will hinge almost entirely on whether the government finally delivers the regulatory breakthrough the industry has been asking for. As API Chair and PGE CEO Julfi Hadi warns, “The government’s target means more than 500 MW per year… but under current rules we barely reach a 3.7% IRR. IPPs need 10-12%. If we reach that level, the industry will boom.”

Until that happens, 2026 is likely to look a lot like 2025: big targets, slow execution, and a geothermal sector still waiting for its real acceleration.

Editing Reiner Simanjuntak